On Saturday 30 August, at the end of the informal meeting of foreign affairs ministers in Copenhagen, EU High Representative Kaja Kallas said that the Member States should look at all possible ways of using frozen Russian assets and windfall profits.
“Ministers acknowledged the need to address Ukraine’s financing gap and to hold Russia accountable for war damages. To achieve this, it is crucial to explore all available avenues while minimising the potential risks”, summarised Ms Kallas. She warned that, given the destruction caused by Russia in Ukraine and its consequences to date, it was “unthinkable” that Russia would ever recover this money, “unless Ukraine is fully compensated for the damage caused”.
European foreign ministers are still divided over the use of Russian assets frozen by the EU, which amount to more than €200 billion and whose windfall profits are being used to help Ukraine. Some Member States are pushing for the confiscation of these assets, while others believe that this is not legally possible and that it could have a significant impact on the economic stability of the Union.
“This is not black and white. [...] Until now [the question] has been ‘should we confiscate or should we not confiscate?’ If the Russians pay their bill, they [will] need more money that we have frozen. But could we give these frozen assets more leverage? That’s the discussion”, said the Danish minister, Lars Løkke Rasmussen.
At the same time as the meeting of ministers, during a tour of the countries bordering Russia and Belarus, the President of the European Commission, Ursula von der Leyen, explained that the Commission was pushing ahead with work on the use of assets, “because it is clear that the [aggressor] must pay for [its actions]”.
The Commission is working on bolder proposals to increase the benefits derived from these assets. “The use of frozen assets with the potential scenario of moving them into funds that produce higher income in terms of interest rates, for example, that is a solution we’re willing to explore”, explained the Romanian minister, Oana Țoiu.
Lithuania’s Kęstutis Budrys has proposed that the assets be withdrawn from Euroclear, placed in a special purpose vehicle and implemented by legal means. “And these assets can be provided in the form of [...] guarantees, in the form of loans to Ukraine with some conditionality of reparations being paid by Russia. And this is how we will share the responsibility and the costs of the risks”, he explained.
Belgium, which hosts Euroclear, wishes to maintain the status quo. “Those Russian sovereign assets must remain immobilised until Russia compensates Ukraine for the damage it has inflicted and continues to inflict on a daily basis. So we need to use those immobilised assets as a leverage for negotiations”, explained Belgian Minister Maxime Prévot.
Pointing out that the frozen assets were already benefiting Ukraine through windfall profits and the ERA loan mechanism, Mr Prévot felt that “if you want the goose to keep laying golden eggs, you must not kill the goose”. Similarly, in his view, “changing the investment strategy is not an option [either] because it could increase the level of risk, both legal, financial and judicial risk”.
Supporting Belgium. Ms Kallas explained that an exit strategy needed to be drawn up on how to ensure that Russian funds would be used to rebuild Ukraine after a peace agreement. “There are risks, of course, which Belgium and many others have raised. Let’s work to alleviate them and find a concrete solution for the day after, in the event of a peace agreement. There is also the question of what will happen to these assets. And we have to respond”, she explained. She pointed out that the Member States had underlined their solidarity with the Belgians, who are therefore “not left alone to face the risks”.
Describing Belgium’s concerns as “entirely legitimate”, the Estonian minister, Margus Tsahkna - in favour of immediate confiscation - felt that ways had to be found to support Belgium, “as partners or as a coalition of the willing”, and that measures had to be taken to reduce the risks. “We must give Belgium solid guarantees as a coalition. And I’m not talking only about the European Union. I’m talking about maybe G7 countries”, he said.
Ideas on the 19th sanctions package expected this week. In addition to the frozen assets, the ministers discussed the future sanctions package, the 19th, which is due to be proposed by the European Commission in the next few days.
At the end of the informal meeting, the High Representative announced that she had asked the Member States to present their proposals “next week”. “We have to work out the details, but I think the general mood in the room was that we had to move forward [on sanctions] and do it as quickly as possible”, added the Danish minister, Lars Løkke Rasmussen, adding that the Russian economy was in trouble.
According to Ms Kallas, the options include secondary sanctions, sanctions against those who support the war, as well as import bans and customs duties on Russian products. And she added: “Efforts against shadow fleet ships must also be stepped up”.
On their arrival at the meeting, several ministers had publicly emphasised the need to impose further sanctions on Russia’s ‘shadow fleet’ and on the financial and energy sectors.
“We [have] avoided the very sensitive topics for Russia and those are the oil and gas companies. This is Lukoil, Rosneft, Gazprom, Novatek and other companies”, said Lithuania’s Kęstutis Budrys, calling for sanctions. He also took the view that Rosatom and all new contracts with the company should be banned in Europe. He also called for the price ceiling for oil products to be lowered “so that it becomes unbearable for Russia”.
The Finnish minister, Elina Valtonen, argued in favour of a tariff system “that would also make it possible to exert additional pressure on Russia on all types of products”. For his part, the Czech minister, Jan Lipavský, once again called for restrictions on the movements of Russian diplomatic representatives within the Schengen area.
Ms Kallas and Mr Rasmussen stressed that European measures would be stronger if they were coordinated with the EU’s partners, including transatlantic partners. (Original version in French by Camille-Cerise Gessant)